Econ 202: Economics Exam Trivia Quiz!

Government intervention in the form of binding price floors or binding price ceilings can result in either surpluses or shortages. When a price floor is set above the equilibrium price, it creates a surplus as the quantity supplied exceeds the quantity demanded. On the other hand, when a price ceiling is set below the equilibrium price, it creates a shortage as the quantity demanded exceeds the quantity supplied. Therefore, government intervention can lead to imbalances in the market, causing either surpluses or shortages depending on the specific intervention.

After the quota is in place, the area represented by c + e on the graph represents the deadweight loss. This is because the quota limits the number of flights to Q1, which reduces the quantity of flights traded in the market. As a result, there is a decrease in consumer surplus (area c) and a decrease in producer surplus (area e). The deadweight loss represents the loss of total surplus in the market due to the reduction in quantity traded caused by the quota.

When making a "how much" decision, it is important to compare the marginal benefits of an action to the marginal costs of that action. Marginal benefits refer to the additional benefits or gains that will be obtained from taking the action, while marginal costs refer to the additional costs or sacrifices that will be incurred. By comparing these two factors, one can determine whether the benefits outweigh the costs and make an informed decision about the optimal quantity or level of the action to undertake. This approach ensures that resources are allocated efficiently and maximizes overall welfare or utility.

When the government imposes an excise tax in a market with a downward-sloping demand curve and an upward-sloping supply curve, consumer surplus falls because the tax increases the price paid by consumers, reducing the quantity demanded. Producer surplus also falls because the tax reduces the price received by producers, leading to a decrease in the quantity supplied. Additionally, a deadweight loss is created because the tax distorts the market equilibrium, causing a reduction in overall welfare and efficiency.

If the government wants rent controls to be immediately effective, they will most likely be set at Rent0 and Rent1. This is because Rent0 represents the maximum rent that landlords are allowed to charge, while Rent1 represents the actual rent that tenants are required to pay. By setting Rent0 at a lower level than Rent1, the government ensures that landlords cannot charge excessive rents, thus making housing more affordable for tenants.

Eddie has $10 to spend on both popcorn and peanuts. If he spends all of his money on peanuts, he can buy 10 bags since each bag costs $0.25. Therefore, the maximum number of bags of peanuts that he can purchase is 10.

The table shows the relationship between the quantity of inputs (labor) and the quantity of output (apples) in Tonya's production. In the short run, Tonya is unable to adjust her fixed inputs, such as land or capital. Therefore, she can only vary her variable input, which is labor. The table indicates that as Tonya increases the quantity of labor, the output initially increases but then starts to decline. This diminishing marginal product suggests that Tonya is operating in the short run, where she is experiencing decreasing returns to labor.

In the long run, all costs are variable. This means that all costs can be adjusted and changed over time. In the long run, a business has more flexibility to make changes to its costs, such as adjusting production levels, changing suppliers, or implementing cost-saving measures. Fixed costs, on the other hand, remain the same regardless of the level of production or sales. Marginal costs represent the additional cost of producing one more unit, while constant costs do not change with the level of production.

The average total cost is calculated by adding the average fixed cost and the average variable cost. In this case, since Pat purchases two mixers and bakes 200 cakes per day, the average fixed cost is $8 and the average variable cost is $6.50. Therefore, the average total cost is $8 + $6.50 = $14.50.

The government can impose a $5 excise tax on sellers to limit shrimp sales to 500 pounds. This tax will generate a total tax revenue of $2,500.

If an increase in output results in a decrease in average total cost, it means that the cost of producing each additional unit is decreasing. This implies that the marginal cost, which represents the cost of producing one additional unit, must be less than the average total cost. Therefore, the correct answer is less than average total cost.

When an increase in the firm's output reduces its long-run average total cost, it achieves economies of scale. This means that as the firm produces more, it benefits from cost efficiencies and lower average costs. This could be due to factors such as increased specialization, better utilization of resources, and improved bargaining power with suppliers. As a result, the firm can enjoy economies of scale, leading to higher profitability and competitiveness in the market.

The opportunity cost of a good is the value of the next best alternative that is given up in order to obtain that good. In this case, if Faruq spends all of his income on tacos and milkshakes, the opportunity cost of one milkshake is equal to the number of tacos he could have bought with the same amount of money. Since the price of a taco is $10 and the price of a milkshake is $2, Faruq could have bought 10 tacos with the same amount of money he spent on one milkshake. Therefore, the opportunity cost of one milkshake is equal to 10 tacos, which can be expressed as 1/5 since 10 tacos is 1/5 of a milkshake.

The total cost curve is positively sloped because as the quantity of output increases, the total cost also increases. This is due to the law of diminishing returns, where the additional units of input become less and less productive, leading to higher costs to produce additional output. As a result, the total cost curve has a positive slope, indicating that higher levels of output require higher costs.

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A price floor is a government-imposed minimum price set above the market equilibrium price. This means that the price at which buyers and sellers are willing to trade is lower than the price floor. As a result, there is a surplus of the good because suppliers are producing more than what consumers are willing to buy at the higher price. This surplus occurs when the quantity supplied exceeds the quantity demanded, leading to an excess supply of the good.

In the figure, the deadweight loss represents the loss of economic efficiency due to the imposition of a quota. The deadweight loss is the triangle formed between the supply and demand curves, and the quota quantity. In this case, the quota is set at 100 books, which creates a shortage in the market. The deadweight loss is calculated by finding the area of the triangle, which is equal to 1/2 * base * height. The base is the difference between the equilibrium quantity and the quota quantity, and the height is the vertical distance between the supply and demand curves at the quota quantity. Calculating this, we find that the deadweight loss is $6,750.

Behavioral economics is a field that aims to understand and explain the decision-making processes of individuals. It focuses on the fact that people often make choices that seem irrational or inconsistent with traditional economic theories. By studying these seemingly irrational behaviors, behavioral economics seeks to uncover the underlying psychological and cognitive factors that influence decision-making. This helps in developing a more accurate understanding of human behavior and designing effective policies and interventions to improve decision-making processes.

To maximize total net benefit from a particular activity, consumers and firms evaluate each activity at the margin. This means that they assess the additional benefit or cost of engaging in one more unit of the activity. By comparing the marginal benefit with the marginal cost, they can determine whether the activity is worth pursuing further. Evaluating at the margin allows for efficient decision-making by considering the incremental impact of each additional unit of the activity.

An increase in the tax rate is most likely to decrease tax revenue when the elasticity of demand is high (in this case, 3.3) and the elasticity of supply is low (in this case, 2.1). A high elasticity of demand means that consumers are very responsive to changes in price, so if the tax rate increases, they will likely decrease their demand for the taxed good, resulting in lower tax revenue. On the other hand, a low elasticity of supply means that producers are less responsive to changes in price, so they may not increase their supply enough to offset the decrease in demand, further reducing tax revenue.

Diminishing marginal returns refers to a situation where each additional unit of an input used in production leads to a smaller increase in output. This means that as more of a particular input is added, the overall productivity of that input decreases. In other words, the initial increase in output may be significant, but as more units of the input are added, the incremental gain in output becomes smaller and smaller. This concept is important for firms to understand as it helps them optimize their production processes and make informed decisions about resource allocation.

A price floor is a minimum price set by the government for a good or service. It prevents prices from falling below a certain level. In this case, the government institutes a price floor that results in too many resources being allocated for the production of a good. This suggests that the price floor is set higher than the equilibrium price, causing an excess supply. Among the given options, the only price that is higher than the equilibrium price is $20. Therefore, the correct answer is $20.

The existence of diminishing returns does not affect the average fixed cost curve because average fixed costs remain constant regardless of the level of production. This is because fixed costs do not change with the level of output. As a result, the average fixed cost curve is a horizontal line, indicating that the average fixed cost per unit of output remains the same regardless of how much is produced.

According to marginal analysis, Alice should buy another ticket and attend the movie. Marginal analysis involves comparing the marginal costs and marginal benefits of a decision. In this case, the marginal cost of buying another ticket is $7, while the marginal benefit of seeing the movie is not mentioned. However, since Alice still wants to attend the movie, it can be inferred that her marginal benefit of seeing the movie is greater than the cost of buying another ticket. Therefore, it is rational for her to buy another ticket and attend the movie.

Based on the table, the marginal benefit of attending each additional football game decreases as Sed attends more games. However, the total benefit of attending each game is positive and increases with each additional game. Since the cost of attending each game is $10, Sed should attend as many games as the total benefit exceeds the cost. In this case, the total benefit exceeds $10 for all 5 games, so Sed should attend 5 games.

Sunk costs are hard to ignore because of loss aversion. Loss aversion refers to the tendency of individuals to strongly prefer avoiding losses rather than acquiring gains. When people have already invested time, money, or effort into something, they perceive it as a loss to abandon it. This leads to a bias in decision-making where individuals continue to invest in a project or endeavor, even if it is no longer rational or beneficial, simply because they want to avoid the feeling of loss associated with the sunk costs.

If a consumer buys more plastic bins and fewer door hooks, the marginal utility of plastic bins will fall, and the marginal utility of door hooks will rise. This is because of the principle of diminishing marginal utility, which states that as a consumer consumes more of a particular good, the additional satisfaction or utility derived from each additional unit of that good decreases. Therefore, as the consumer buys more plastic bins, the marginal utility derived from each additional bin will decrease. Conversely, as the consumer buys fewer door hooks, the marginal utility derived from each additional hook will increase.

Based on the table, we can see that the firm employs a total of seven cabinetmakers. Since the question states that each cabinetmaker can be hired at no cost, it would make sense for the firm to hire as many workers as possible to maximize production. Therefore, the correct answer is seven.

When Sam decides to decrease his consumption of popcorn, it means that he is willing to substitute popcorn with something else, in this case, soft drinks. Since both goods are subject to diminishing marginal utility, the more popcorn Sam consumes, the less satisfaction he gets from each additional unit. By decreasing his consumption of popcorn and increasing his consumption of soft drinks, Sam can increase his overall utility because the marginal utility per dollar spent on popcorn will be greater than it was initially. In other words, Sam will get more satisfaction from the additional soft drinks he consumes compared to the satisfaction he was getting from the additional popcorn.

The new tax system of replacing all federal, state, and local taxes with a single tax of $14,000 for every person 18 and older would improve tax efficiency. This is because it simplifies the tax system by eliminating multiple taxes and replacing them with a single tax. This would reduce the administrative burden and costs associated with collecting and managing multiple taxes, making the overall tax system more efficient.